Groups call on Congress to treat rural, urban businesses equally

As lawmakers consider legislation to address the economic fallout of the coronavirus pandemic, a group of 65 small business lenders, including the Center for Rural Affairs, across 32 states are calling on Congress to treat rural and urban businesses equally when it comes to providing relief.

In a letter to Congress, the group is requesting that any new legislation to address the coronavirus pandemic include six months of principal, interest, and fee payment relief for Rural Microentrepreneur Assistance Program borrowers, similar to that already granted to businesses who borrow through Small Business Administration.

“We believe these small business borrowers should be treated equally,” said Johnathan Hladik, policy director with the Center for Rural Affairs. “The majority of these business owners are in the service industry, which has been severely damaged by the coronavirus pandemic. They should not be ignored just because they are rural.”

As you consider legislation to address the economic fallout of the coronavirus pandemic, we respectfully request that you include six months of principal, interest, and fee payment relief for the small business entrepreneurs served by the U.S. Department of Agriculture (USDA) Rural Microentrepreneur Assistance Program (RMAP).

The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act created a Small Business Debt Relief Program that provides immediate relief to small businesses with Small Business Administration (SBA) loans, including microloans. Under this program, SBA pays all loan payments the business owes to their SBA lender, including principal, interest, and fees, for six months. Unfortunately, no such provision was included for small businesses with USDA loans. We believe these small business borrowers should be treated equally.

Similar to the SBA Microloan Program, RMAP offers important assistance to businesses nationwide. First created in the 2008 farm bill (7 U.S.C 2008s), RMAP allows the USDA to coordinate with Microenterprise Development Organizations (MDOs), who provide training, assistance, and lending capital to rural entrepreneurs. To qualify for a small business loan through an RMAP lender, a business must be located in a rural area, unable to access loan capital from other sources, and have 10 or fewer employees.

Since 2008, RMAP has helped more than 2,100 small businesses expand operations, create new jobs, and tap into new markets. Loans have been made in nearly every state and in Puerto Rico. In 2017, 18 non-profit MDOs worked with the USDA to make 156 loans. Though the average amount was just under $28,000, this helped start 26 new businesses and create 286 new jobs. At least 60 of these loans were made to women and 153 to racial/ethnic minorities.

The small business owners who rely on RMAP lending typically do not qualify for SBA loans due to vulnerabilities, such as a lack of credit history or an absence of SBA lenders in their rural community. The majority of these business owners are in the service industry, which has been severely damaged by the coronavirus pandemic. The most common business types to receive an RMAP loan are retail, restaurants, salons, and care providers. Each of these are struggling today.

To help provide relief during this pandemic, a majority of the RMAP lenders who provide small business loans are offering up to three months of payment deferral. A significant number of borrowers have accepted this offer. While deferral does provide some relief, it is only temporary. Once the three-month period concludes, borrowers will still owe the full loan balance, plus interest. This is in contrast to those working through SBA lenders, who are receiving six months of complete payment forgiveness.

When the small business owners who rely on RMAP lending are forced to close, the non-profit MDOs who service those loans will not receive full payment. This wave of loan defaults will make it less likely these lenders can continue making loans in the future. That is because the non-profit lender must still pay the loan balance back to USDA when borrowers default. This is not the case with SBA lenders, who are now receiving full payment from SBA on outstanding loans.

This policy has the potential to change lives for more than 1,000 small business owners in rural America. We believe these individuals deserve the same opportunity as SBA borrowers, and should not be treated differently because of the agency they borrow from. We respectfully encourage you to address this oversight in any forthcoming legislation.